IPTV Monitor—Issue 2

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Our survey shows that incumbents typically have the largest share of IPTV customers. Uptake is fastest in markets where competition results in aggressive marketing and pricing. Indeed, competition to telcos and ISPs is stiffening as large software, hardware and broadcasting companies make video content available online. What’s more, market consolidation appears to be dovetailing with advances in technology performance which, as a whole, promises cheaper, better equipment.

We also found that although more operators are moving to commercial IPTV launches, adoption is developing slowly. And operators don’t necessarily have to own networks and supply set-top boxes to deliver television and films over IP networks.

Finally, we’re seeing a trend toward large equipment manufacturers betting on growth and buying smaller IPTV technology companies. Meanwhile, regulation remains an irritant, but it may prove beneficial for competitive operators.

Every three months, Accenture and the Economist Intelligence Unit produce the IPTV Monitor summarizing major trends in the global IPTV industry. The newsletter is the result of a wide-ranging Accenture/Economist survey of more than 300 executives in technology and media firms involved in the IPTV business. The survey covered 40 countries in three regions—Europe, the Americas and Asia Pacific.

Our findings touched on three major developments in IPTV: content management, technology standards and operations management.

Content management poses enormous difficulties for network operators. Content providers will be anything but submissive partners, but incumbent telcos have assets of their own, including large customer bases, secure networks and strong national brands. But at the same time, content management is telcos' biggest operational headache. Distribution and revenue-sharing deals are operators’ preferred means of sourcing content. Only a few will seek to acquire or develop content in-house.

Set-top box software and hardware remain the most problematic part of the IPTV technology chain. The blame rests largely on the prevalence of multiple proprietary standards. Operators must push technology suppliers and standard bodies to reach agreement on unified standards. Quality of service suffers, partly as a result of multiple standards, but industry executives expect technology glitches to be less of an obstacle to consumer adoption over the next three years.

Managing partnerships with content and technology providers is the toughest operational challenge facing operators seeking to establish a viable IPTV business. Developing creative marketing strategies and effective customer service are other major operational hurdles.

Many telcos are recruiting new talent to manage IPTV content and marketing. But they will also need to implement some cultural and organizational changes for their new staffs to work effectively.

Of the various parts of the IPTV puzzle, technology development is arguably the least problematic for network operators. The majority of industry executives we surveyed view content sourcing and developing marketing strategy and operational capabilities as much tougher challenges. Small wonder that not a single network operator who replied to the Accenture/ Economist Intelligence Unit survey believes that set-top box (STB) technology is completely ready. Even consumer electronic manufacturers are cautious; only 6 percent of those polled believe STBs are fully ready for IPTV delivery.

If telcos really want to be considered media companies in the future, they will have to make changes that do more than merely poach a few executives from broadcasting and TV firms. Once service providers have IPTV content, they must sell it. A fair number of survey respondents—35 percent—see developing creative marketing strategies as the second biggest obstacle to building an IPTV business. Managing customer service is the other major operational concern for IPTV providers. Here telcos display somewhat greater confidence than others in the IPTV industry that they'll be up to the task. Experience suggests that such confidence is unwarranted, however. Although telcos have long experience in interacting with their customers, in many cases their customers remain unimpressed with telcos.

After a long lament that big-brand content companies do not take broadband delivery seriously, telcos have finally started trumpeting content deals with major Hollywood film companies and other content distributors. This is not a business for the half-hearted: content agreements, after all, do not fall into operators’ laps.